Rational Decision Making
Rational decision making means taking decisions on the basis of facts and logical reasoning. A decision making is said to be rational when he identifies and analysis systematically identifies alternatives and selects the most appropriate alternative on the basis of relevant data.On the other hand decision making becomes irrational when the decision maker depends purely on hunch and intuition without using relevant facts and figures.
The administrative model of bounded rationality was given by Prof.Herbert Simon to explain the decision making behavior in real life .the model recognizes the fact that due to several constraints managers are unable to make perfectly rational decisions. There are several boundaries to rationality in decision making. The principle of bounded rationality has the following implications:
1.An individual does not study and analyze problem fully due to personal bias and indifferent attitude etc.
2.An individual does not have full knowledge of the alternatives and their consequences.
3.An individual interprets the organization goals in its own way.
4.An individual does not search for the best solution but search for a good solution. In other words individual aims at a satisfying solution rather than the optimum solution.
5.The effectiveness of the decision is dependent upon the environmental factors that are beyond the control of the decision making.
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